NZD resilient in face of risk-off mood

Key Movers

With financial markets largely unperturbed by events in Russia at the weekend, attention on Monday turned to the PBOC’s daily yuan fixing. With the yuan in the midst of a precipitous downward pitch, the PBoC issued its first signal it is uncomfortable with the one-sided shift in direction raising the daily fixing rate. Despite the signal, the yuan collapse continued through 7.24, elevating the likelihood of higher fixes through the days ahead and other tools to try and arrest the yuan decline.

With the yuan under pressure and geopolitical tensions weighing on commodity markets, risk demand will likely remain subdued through the week ahead.

In other news, the euro edged upward despite a German IFO survey showing further deterioration in business conditions. Manufacturing activity continues to weaken while expectations components soften, falling to their lowest level in nearly 12 months. The GBP edged marginally lower,  while the yen found some support against a lower rates backdrop.

Despite the reprieve, the yen faces sustained selling pressure. As we approach 146 we expect imminent intervention from the BoJ and Ministry of Finance and expect further depreciation in yen value which will be more measured over the coming days.

Our attentions remain on developments in Russia while US durable goods orders, housing data and consumer confidence dominate the macroeconomic ticket.